Report: Nearly 20% of audited third-party MVD transactions conducted with error 

A recent report from Arizona’s watchdog agency over governmental agencies found nearly 20% of reviewed third-party Motor Vehicle Division transactions lacked documentation confirming individuals or entities were qualified to obtain MVD forms.  

The Arizona Auditor General published its August report of third-party MVD operations and concluded the department was putting public safety and welfare at risk by allowing third-party locations to issue vehicle titles, driver licenses and ID cards to “unqualified or unauthorized” parties. 

This issue with MVD can lead to a higher safety risk on public roadways since unqualified or unsafe drivers may be allowed to obtain a driver’s license, according to Auditor General Lindsey Perry’s report. But other potential crimes including vehicle title fraud, identity theft and terrorism have a higher risk due to the lack of MVD oversight over these private companies. 

“According to (the American Association of Motor Vehicle Administrators), driver licenses and identification cards are highly valuable to criminals because they can be used to perpetrate fraud and other types of crime,” Perry’s report says. “Additionally, AAMVA indicates that issuing driver licenses and identification cards containing false or inaccurate information might result in an individual being granted privileges they may not be entitled to.” 

Private companies that offer MVD services accounted for about 36% of all MVD-certified documents issued in fiscal year 2022. Approximately 450,000 driver licenses or identification cards and nearly 6 million vehicle titles and registrations were issued by third-party offices.  

In October 2022, there were 96 third-party offices that operated 175 locations in the state and 67 of those locations authorized to issue driver licenses and ID cards. 

Auditor General staff examined 130 third-party MVD transactions selected for self-review between March and October 2022. Out of the reviewed transactions, staff determined 25 of them were issued to individuals or entities where the transaction shouldn’t have been completed since they lacked qualifying documents. 

Three third-party companies were deemed “high-risk” in January and MVD identified two of those companies as repeatedly not completing their self-reviews for quality assurance. 

Arizona Department of Transportation Director Jennifer Toth acknowledged the findings of the audit and has agreed to follow all recommendations issued by the Auditor General’s Office for corrective action. Several department changes are drafted and in a “pilot phase,” according to a formal response to the audit from Toth. 

Rep. David Cook, R-Globe, said the report was alarming in a letter he wrote to Toth about the audit. He also said he was concerned about how long the pilot phase would last since Perry’s report notes MVD had been developing its third-party correction procedures for six months up until April. 

“It does not appear that MVD made any significant process during the six months following the Auditor General’s audit. Moreover, the Report reflects that two years after the 2015 performance audit, MVD had successfully implemented the Auditor General’s recommendations. Why hasn’t MVD simply adopted its previous oversight procedures,” Cook wrote to Toth. “These astonishing results are unacceptable and require an immediate response,” he continued. 

According to Perry’s report, 12% of third-party self-reviews to MVD weren’t completed. Out of the 25 transactions identified as errant in the audit, 10 individuals or entities received vehicle titles without information required to prove lawful transfer of vehicle ownership. 

Another eight individuals received driver licenses despite lacking qualification and four individuals received a license or identification card without sufficient identity or residency documentation. 

Most of the errant transactions were unresolved by private companies and MVD reported nine of the 25 errant transactions identified in the audit had no issues. Out of the transactions that were flagged for correction by third parties, the issues weren’t resolved for months when MVD procedure requires issues to be resolved within seven days. 

“When state agencies outsource their important government functions to third parties, and those third parties fail to meet their legal obligations and are not properly supervised as required by law, Arizonans suffer the consequences,” Cook wrote to Toth. “In this instance, those consequences are particularly severe and threaten the public safety.” 

The audit is part of a series of sunset reviews of MVD. Another audit published on Aug. 25 found MVD failed to inspect some contracted commercial driver license providers in a timely way and didn’t consistently take remedial action to address inspection violations from the providers the department did inspect. 

As of December 2022, the department didn’t inspect 19% of CDL providers and 56% of CDL examiners at least once every two years as required by federal regulations. Auditors also determined MVD “has not established comprehensive processes, including policies, procedures and guidance to appropriately and consistently administer enforcement actions that address identified violations.”